5 Key Basic Franchise Agreement Terms To Negotiate Strongly

Basic franchise agreements have no set standard that all franchises adhere to. Therefore, the provisions found within vary greatly from franchise to franchise. There are also various types of franchise agreements, but many agreements contain key terms that remain consistent across many businesses. Note that some of these covenants may be negotiable. As an entrepreneur, you should be looking for methods of saving money and making profits anywhere you can. Negotiating some of these terms is one way of doing so. Read on to discover key basic franchise agreement terms to negotiate strongly.

Initial Fee

The initial fee in your franchise agreement is the first term to negotiate. Initial fees are one-time startup fees that have little impact on long-term revenue. Therefore, they are more likely to be adjusted by the franchisor than any other fee. Many of the other fees in your franchise agreement serve as major income generators for the franchisor. They will refuse to budge if you attempt to negotiate this, so stick to the initial fee. It is only the fee to join the franchise, and thus can be reduced at a minimal loss to the franchisor. Surely, negotiating your initial fees can help you hit the ground running with your franchise.

Grand Opening Help

Extra help with your business’s opening is another franchise agreement term to negotiate. Many franchisors already provide franchisees with assistance when opening a new location. They might be willing to provide additional support in the form of keeping their personnel around for a longer period of time. This will help you and your staff with extra guidance and using a training plan in the franchise’s operating procedures. Of course, extra opening support is a great term to negotiate on your basic franchise agreement.

Restricted Covenants

Restricted covenants are an imperative part of your franchise agreement to pay attention to. You may find some to be unreasonable, and therefore wish to negotiate, especially ones related to the “post-term” period. One example of this is non-competes. Say you’ve just sold a restaurant franchise, for example. You probably want to start another, but a long non-compete term in your first agreement may prevent you from doing so. Therefore, terms such as non-competes and other restricted covenants are critical to negotiate. Franchisors will often be willing to work with franchisees on this provision of their agreements. Absolutely, negotiating restricted covenants on your franchise agreement will save you a lot of headache later on.

Territory Consideration

Considering the territory granted you by your franchisor is an additional key term of your agreement to negotiate. Having the clear geographic boundaries of your franchise market is a big help in planning for your business. In addition, start thinking about aspects such as distribution channels and customer locations. Your franchise agreement will dictate whether you have rights to online sales or are restricted to retail. It will also define your territory by either distance to your retail location or where the customer sits. Negotiate according to what makes the most sense for your business as well as how easily you can enforce these terms. You can also choose an Ace Cash Advance location when starting a franchise. Indubitably, territory considerations are another basic franchise agreement term to negotiate.

Transfer And Renewal Conditions

Transfer and renewal conditions are the final key provision to negotiate on your franchise agreement. They may impede your ability to resell your franchised business in the future. Conditions of this nature may include several requirements such as renovating the premises and providing a significant deposit before selling. Additionally, franchisors may reserve a right of first refusal. This would require you to decide if you want to match a third party buyer’s offer on your franchise within 30 days. Therefore, looking at the transfer and renewal conditions in your franchise agreement is imperative in negotiating the best deal you can.

Many terms within a basic franchise agreement are flexible, as there is no set standard for such contracts. Therefore, items such as the initial fee should be negotiated, as they impact you as the franchisee more than the franchisor. Extra opening help is another term to negotiate for more guidance on franchise procedures. Restricted covenants such as non-competes are important to negotiate as they heavily affect your future revenue streams. Considering your territory is also important to avoid any conflicts with either your franchisor or neighboring businesses. Finally, transfer and renewal conditions should be taken into account, as they can affect your ability to sell your franchise or otherwise leave it. When deciding which key basic franchise agreement terms to negotiate, consider the five described above.

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